SMT. VEENA BHUTANI,NEW DELHI vs. ITO, NEW DELHI

PER N.K. CHOUDHRY, J.M.

This appeal has been preferred by the Assessee against the

order dated 14.10.2015, impugned herein, passed by the learned

Commissioner of Income-tax (Appeals)-10, New Delhi (in short “Ld.

Commissioner”) u/s. 250 of the Income-tax Act, 1961 (in short ‘the

Act’) for the assessment year 2010-11.

the return of income by the assessee, the assessee had declared

2 ITA No. 145/Del/2016

Long-term Capital Gain (LTCG) as “nil” qua sale of two plots of land

at Gurgaon and having made investments towards construction of

residential house at New Friends Colony, Delhi. The Assessee

claimed exemption u/s. 54F of the Act.

The Assessing Officer finally determined the capital gain to

the tune of Rs.12,14,077/- and consequently, added the difference

of Rs.12,14,077/- between the LTCG which was declared at “nil”

and the LTCG determined by the Assessing Officer, in the total

income of the Assessee. Subsequently, penalty proceedings u/s.

271(1)(c) of the Act for furnishing inaccurate particulars of income

were also initiated, which resulted into issuance of notice dated 23-

07-2013 u/s. 271(1)(c) of the Act.

In response the Assessee claimed that the sum of

Rs.12,14,077/- remained un-utilized due to the reason that the

competent authority delayed the sanction of building plan of new

residential house.

The said contention of the Assessee was rejected and found to

be not acceptable by the Assessing Officer on the ground that no

evidence in support of her contention has been filed. Secondly, on

one hand, the Assessee had claimed to have invested

Rs.78,48,548/- in the construction of the same house without

sanctioning of building plan, then what prevented her from

investing the additional amount. The Assessee further claimed that

3 ITA No. 145/Del/2016

she had invested more than the net consideration in the new

residential house within the period of three years from the sale of

original asset. The said contention of the Assessee was also found

not acceptable by the Assessing Officer on the ground that the

Assessee had not complied with the provisions of sub-section (4) of

section 54F of the Act. As per provision of section 54F for claiming

full exemption in respect of the LTCG, the Assessee ought to have

utilized full amount of consideration in construction of the new asset

or have deposited the same before furnishing of her return of

income (before due date) in specified bank account. The Assessee

further claimed before the AO that she had disclosed all the

transactions of purchase and acquisition of new asset, on which

LTCG arose at the time of filing of her return of income, so, penalty

proceedings are not attracted. The said contention of the Assessee

was also found not acceptable by the Assessing Officer on the

ground that here, the issue is not about disclosing the transactions,

but the issue is wrong claim of the Assessee u/s. 54F of the Act.

The Assessing Officer further observed that the Assessee has

not filed any submissions on merits of the addition made by the

Assessing Officer. She has also failed to substantiate that no

inaccurate particulars of income were furnished in respect of the

addition made by the Assessing Officer. Further, the Assessee has

accepted the addition made by the Assessing Officer. It clearly

4 ITA No. 145/Del/2016

proves that she has tried to conceal true particulars of

income/furnished inaccurate particulars of her income and has tried

to understate the income deliberately. Thus, it is not a case of mere

addition made by the Assessing Officer but the case of false

declaration made by the Assessee. It is, therefore, clearly

established that the Assessee has committed default of furnishing

inaccurate particulars of income and is liable for imposition of

penalty u/s. 271(1)(c) of the Act.

Commissioner, who vide impugned order dismissed the appeal of

the Assessee and confirmed the penalty imposed. More or less, the

ld. Commissioner affirmed the penalty on the identical findings of

the Assessing Officer as given in the penalty order. The Assessee,

being aggrieved, is in appeal before us.

record. Hon’ble Apex Court in the case of Reliance Petro-products

(P) Ltd. (2010) 322 ITR 158 (SC) has clearly held that “mere

making of the claim which is not sustainable in law, by itself, will

not amount to furnishing inaccurate particulars relating to income of

the assessee”. Further, it was held by the Hon’ble Apex Court that

5 ITA No. 145/Del/2016

“merely because assessee had claimed expenditure, which claim

was not accepted or was not acceptable to revenue, that by itself

would not attract penalty under section 271(1)(c)”.

The spirit behind the above dictum of the Hon’ble Apex Court

is that though the Assessee has filed a claim which is not found

acceptable by the Revenue, that ipso facto, would not lead to

imposition of penalty until and unless the facts and action of the

Assessee warrants the imposition of penalty.

In the instant case, the Assessee has clearly shown the

amount of sale of the properties and investments made towards

construction of residential house and bonafidely admitted that she

had failed to deposit the entire consideration within time, however,

she had paid the entire tax demand as computed by the Assessing

Officer. Further, she could not spend or invest the consideration

received as capital gain before filing the Income-tax Return,

however, claim of exemption u/s. 54F of the Act has been made

bonafidely, as she had utilized more than the sale consideration in

the new property.

We observe as per section 54 of the Act, the Assessee was

supposed to utilize full amount of net consideration in the

construction of the new asset or to have deposited the same before

furnishing the return of income (before due date) in the specified

bank account in order to claim full exemption in respect of LTCG.

6 ITA No. 145/Del/2016

There is no doubt that the provisions of section 54F of the Act are

benevolent provisions and therefore, requires liberal interpretation.

In that sense, the Assessee is entitled to get the benefit of the

benevolent provisions. It is a fact as not disputed by the Revenue

Department that the Assessee had disclosed the transactions

related to sale of the original assets and purchase/acquisition of

new asset in the return of income itself. We are of the considered

opinion just because the Assessee could not deposit the

consideration amount/capital gain in specified bank account, that

does not entail levy of penalty automatically. It is a fact that the

Assessee.

Considering the conduct of the Assessee in disclosing the

transactions, admission of her fault for not utilizing the amount of

capital gain and utilization of amount more than the capital gains in

construction of the new asset within three years, paying of relevant

taxes as determined by the Assessing Officer and bonafidely not filing

any appeal against the denial of claim u/s. 54F of the Act by the

Assessing Officer, we are unable to sustain the penalty of

Rs.2,50,100/- imposed by the Assessing Officer and confirmed by

the ld. Commissioner. Consequently we order for deletion of

penalty.

7 ITA No. 145/Del/2016

Order pronounced in the open court on 30/12/2022.

Sd/- Sd/- (PRADIP KUMAR KEDIA) (N.K. CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER

*aks/-